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Housing Bubble : De Ja Vu All Over Again

the staff of the Ridgewood blog

Ridgewood NJ, the consumer inflation numbers came out showed the biggest advance in prices since 1991. Many economists think inflation is probably higher when you take into account the rise in home prices.

These charts from supply side economist Robert Genetski show a run up in home prices and home building that looks spookily like the inflation in housing from 2005-08 before the helium balloon popped.

Is the Feds easy money policy and its purchases of now $2 trillion of mortgage backed securities creating a new housing bubble? We certainly hope not. No one wants to live through 2008 and 09 again.

Economist Mickey Levy of Berenberg Capital explains: “The Fed is fueling the real strength of the housing market. There’s just no argument for the Fed to continue buying Mortage Backed Securities.” The Fed now holds $2 trillion of MBS – double what it held 12 years ago.

This could be de ja vu all over again and let’s not forget that Fannie Mae and Freddie Mac got the biggest taxpayer bailouts in 2009. They should have been privatized to minimize taxpayer exposure, but we still have a dysfunctional system of socialized risk and private profits.

3 thoughts on “Housing Bubble : De Ja Vu All Over Again

  1. Stop wishing for doomsday, you can’t compare today from yesterday, banks gave out no documentation loans, as greedy realtors and loan officers Manipulated the market for artificial prices, once these folks , some who didn’t even have jobs defaulted on their loans as they knew they would all hell broke loose. The government should have never bailed out the banks!

  2. The banks made risky loans during the last bubble, bc the Democrats in Congress threatened to sanction banks, if they didn’t “make the dream of homeownership available to minorities”.
    The banks couldn’t exactly say “If you’re black or brown, you get a loan!”, so they lowered lending standards so that more minorities could qualify for loans.

    1. or if you were on the NJ House Wives TV Show

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